Tweet

SMEs - a changing trend in SME failure

Written by: Dr. Rob Smorfitt

Article Overview: Are fewer SME's failing

SMEs - a changing trend in SME failure

I commented on another blog the other day about SME failure. I asked the question whether the failure rate of SMEs was up or down. Stefan replied that in the USA the failure rate of SMEs has in fact reduced. Does this apply to Africa or more specifically South Africa?

This is significant. However, other statistics I saw showed that 70% of SME's in the USA are one person businesses. These are baby boomers who legally go into retirement and then return to the economy as SMEs providing services back to their previous employers because of the skills shortage that the departure of baby boomers is contributing to. This trend is definitely occuring in South Africa. The massive skills shortage, which is compounded by the broad range of legislation geared to bring more black Africans into the economy without providing them the necessary skills to do so, is a direct contributor to this trend in South Africa. Government attempts to develop skills in South Africa have been a dismal failure. The apprenticeship system has all but collapsed, which has resulted in insufficient artisans in the country, together with the drive by developed countries to attract artisans to meet the demand created by their economic growth.

The restructuring of the tertiary education has lead to everyone attempting to compete with one another instead of each tier adding it's own unique value to the economy in respect of skills.

My question now is whether or not there is a trend developing whereby there are one person businesses which are highly sustainable due to their origins and source of business, and then a large gap before we see business in the 10 to 20+ employee range? Are we seeing this valley between the one person and the bigger SME growing?

I think perhaps we are, and I feel that the reason could be globalisation/Walmart effect, which leads to ever reducing prices.

Related Articles
  SMEs - are African governments doing it right
  Leverage Subject Matter Experts
  Restricted Access to Finance
  5.2.1 The MIT-SME section: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
  What can business and governments do to promote SMEs?

Article Tags: baby boomer, failure, failure trend, SME, Smorfitt, success



Related Forum Posts
Age and Business - I'm 34 and have owned my own business for 13 years. It's evolved in many ways over the years - changing economic conditions, changing personal situation, changing employees etc. Chris
When does a trend become a legitimate business opportunity? - When does a trend become a legitimate business opportunity? For instance, Krispy Kreme doughnuts was hot for a bit and then fizzled out. So how much time has to pass by or sales numbers do you need to see before you feel the need to also jump in and try to capitalize on a trend that has become mainstream?
Re: A great website is closing down - Hmm.. Sad to see such hard work result in failure. Although we've all experienced and anticipate the potential for failure it's always unfortunate when a venture doesn't work out. Hope they can catch the next one. Phil
Are franchises with unhealthy foods still wise investments? - With the growing trend of "health consciousness", are franchises who serve unhealthy foods still wise investments? The reason I ask is because I haven't had McDonald's fries in ages and when I recently tried them again, they weren't as good as I remembered. My brother later explained how McDonald's now cooks their fries in vegetable oil as opposed to animal fat, which accounts for the difference in taste (or should I say "lack of taste"). So what's the point of changing a signature menu item for "health" reasons when it ends up losing its delicious flavor? I mean if I wanted to eat healthy, I would probably eat somewhere else anyways.
Re: In-House or Outsource? - Unfortunately, in the South African context, very few SMEs see outsourcing as an option. They believe it is too expensive, and they are paranoid that someone will "steal their ideas". I believe that the three main functions that cannot be outsourced are marketing, sales and strategy. These must be done in house I believe. If you do not have the marketing skills then get them. Hire a consultant or attend a course, but get the skills. Even if you use a consultant, you need to understand what marketing is about, as no one knows your market like you do. Marketing is made to seem difficult and complex, but everyone who really understands their markets, can easily learn to do their own marketing. In South Africa, labour legislation is extremely inflexibile, and consequently labour broking is a large industry. This is an ideal starting point for SMEs in South Africa, as it is a legally complex area, whih comes with severe penalties. I say do it! Rob Smorfitt


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Your Local Small Business Online Marketing Funnel

Selling with Humor (and a Sorry Butt)

What is Discretionary Cash Flow

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.